The South Korean currency fell by the most in more than seven months against the U.S. dollar on Monday as the Federal Reserve's quantitative easing (QE) tapering sparked concerns about capital outflows from emerging markets, dealers said.
The local currency ended at 1,084.50 won per the greenback, down 14.10 won from the previous session.
It was the biggest fall since June 20, 2013, when the local currency fell by 14.90 won per the dollar.
The won fell to as low as 1,085.30 per the dollar at one point as currency volatility rose.
"The dollar gained ground, aided by the Fed's stimulus cut and emerging market jitters," said Jeon Seung-ji, a currency analyst at Samsung Futures Co. "The won's weakness increased as foreign investors unloaded stocks."
The Fed said last week it will stay on course by reducing monthly asset purchases to US$65 billion starting this month, citing the improvement in the U.S. economy.
In December, the Fed decided to start tapering the quantitative easing from $85 billion to $75 billion in January.
The Fed's move has sparked concerns about capital outflows from emerging markets, which are vulnerable to volatile cross-border capital flows.
The benchmark Korea Composite Stock Price Index (KOSPI) fell
1.09 percent to end at 1,919.96. Foreign investors sold a net 418.9 billion won worth of local stocks on the main bourse.
The Korean government said that it will closely monitor the local financial markets as jitters in emerging countries like Argentina and Turkey are feared to spread into some eastern European countries.
The government said it is too early to say whether the market unrest may spread to eastern Europe or other Asian nations but that it will take actions if necessary.
Mindful of possible expansion of risks, the financial watchdog checked local banks' foreign currency liquidity conditions earlier in the day.
Experts said that South Korea is widely seen as sound as it logged a current account surplus run for the 23rd straight month in December. Its foreign exchange reserves stood at a record $346.46 billion as of the end of December.
"As emerging markets are still unstable, there is a possibility that the won may further weaken per the dollar," Jeon said. "But it would be difficult to envision the won falling below the 1,100 per the dollar level." (Yonhap)